Page 24 - AAA JULY - AUGUST 2014 Online Magazine

FEATURE FARE WAR

Airlines entering India
will find homegrown
low cost carrier Indigo a
formidable competitor.

“The war in the Indian skies has just pocketed international competitors dish held up due to the general elections in
become more intense...it will only intensify out unimaginable low fares to increase the country. Further delay happened with
in the lean July-September quarter,” says their payloads. airline battling legal issues with local
Amber Dubey, partner and India head of “Domestic airlines continue to be airlines.
aerospace and defense at KPMG. very precariously placed and AirAsia’s The Federation of Indian Airlines
“If an unbridled fare war continues, entry will further challenge the existing has expressed strong resentment over
including peak hour seats, we may see airlines,” says Kapil Kaul, South Asia CEO granting permission to AirAsia India
financial distress increasing and probable at Centre for Asia Pacific Aviation. to start operations in the country.
exit of one or two airlines in the next 12 to For its part, AirAsia India says its model “While foreign investment needs to be
18 months,” Dubey cautions. has always been about keeping the fares encouraged, the same cannot be at the
With AirAsia’s emphasis on offering low and its costs “razor-thin”. “This model cost of the domestic industry,” federation’s
low fares, the existing airlines say they has been successful in similar markets associate director Ujjwal Dey avers.
will have little choice but to match or offer for the past 12 years...”We believe that we “Vested interests, inimical to free
lower fares to retain passengers, despite will be able to bring that kind of discipline and fair competition that can benefit
the financial loss. Most of India’s domestic to India as well,” Chandilya says. air travellers, are spreading canards
airlines have been mired in losses owing According to industry estimate, over to jeopardize the operations of Air Asia
to high fuel costs and intense price the last seven years, Indian carriers India,” Chandilya says.
competition. have lost a combined $10.1 billion, or an “New airlines, like AirAsia India, will
“Everyone wants to increase their average of $22 every time a passenger immensely benefit consumers, making air
market share. A new player can spoil the boards an aircraft. travel more affordable. This has already
chances of increasing the market player Jet Airways and SpiceJet have posted been witnessed in movements in air fares
of an existing airline, as the market is not annual losses, while Kingfisher Airlines, in the last two weeks, thereby helping to
really expanding,” says an executive of a saddled with $1.4 billion of debt, has been expand the growth of civil aviation in the
low-cost carrier. grounded since 2012. Only IndiGo, one of country,” it says.
Analysts feel that with such India’s six main carriers, has been making After Air Asia, budget airlines such as
competition, airlines will continue to profits in recent years. Tiger Airways and few gulf carriers are
price below cost despite their huge The Indian launch of AirAsia affirms also looking at India as a lucrative market
accumulated losses and weak balance India’s reputation as a lucrative aviation to expand business.
sheets. But they say it will become very market in the long run, says Dubey.
difficult for debt-ridden Indian carriers The airline saw several delays in its
to operate in a market in which deep- planned take off as the approval was first

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